### From Glossary

This is an augmentation to any mathematical program that has
constraints representing a capacity limit. Suppose
represents the limitation of using more than units of capacity,
where is the actual amount used for policy . Then, this
becomes a capacity expansion model by replacing the constraint with

Here

is the maximum
amount of new capacity, with

the portion brought online by
choice of

. This is also reflected in the objective function with
an added cost term, say

, such that

and

increasing on

. If continuous use of the capacity is not possible (i.e.,
one builds a new plant or not), the model further requires

to be
binary-valued (0 or 1), and

is called the

fixed charge.